CMV: Increasing the minimum wage hurts the middle class

I frequently read the phrase a rising tide lifts all ships. I think it’s a neat little saying, but it doesn’t mean anything.

Right now, we’re seeing fast food workers be paid $15/hr without any government intervention. Less than just a few years ago, those same jobs were paying little more than minimum wage. A near 100% pay increase has occurred at the lowest rung of society, and yet we have not seen that pay increase among middle earners. Nurses aren’t making twice what they did in 2018. Nor are accountants, engineers, and IT.

I feel like the rising tide argument relies heavily on this idea that a higher wage floor puts upward pressure on everyone’s salaries. Ironic, of course, because that kind of thinking implies that an invisible hand in the free market will drive salaries up accordingly… which is the very same rationale being disavowed in order to mandate a higher minimum wage.

Demand, especially for elastic goods, is correlated with income. Hence why demand skyrocketed as stimulus went out, evictions we’re banned, and unemployment benefits increased. I’m not meaning to imply that inflation is due to an increased minimum wage. Obviously the driving factor there is the massive printing of money since covid plus all of the supply chain issues. Yet in spite of it all, demand is still quite high.

Even if an increased minimum wage doesn’t spur macro inflation, what it will do is make it more difficult to purchase products and services at MSRP. If demand exceeds supply, then a shortage ensues. All the while, minimum wage earners continue their heightened demand while middle earners make little more than they did pre-covid.